The drop in cost is due to an accumulation of incremental technology improvements, along with economies of scale. And advances going forward—better batteries, electric motors, and power electronics and transmissions—could cut costs by another 50 percent.

At Toyota, for example, the company shifted from a 500-volt electrical system to a 650-volt one, a decision that produced “a host of benefits,” says Justin Ward, advanced power-train program manager at the Toyota Technical Center. The company was able to reduce the cost and weight of copper wiring, use cheaper power transistors in the electronics that control the hybrid system, and make the electric motor cheaper and smaller.